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Jakarta Post

Chinese firms set aside $1.2b to build steel plant in Jambi

  • Raras Cahyafitri

    The Jakarta Post

Jakarta   /   Thu, October 30, 2014   /  09:49 am

Chinese firms Fuhai Group and Ansteel Group will invest up to US$1.2 billion in the development of an industrial estate and its infrastructure facilities in Ujung Jabung, Jambi, Sumatra.

Fuhai chairman Lizhi Zhao said in Jakarta on Wednesday that his company had recently signed an agreement to develop an industrial zone that would be used to develop a steel smelting plant.

He said he and the companies'€™ representatives would visit Ujung Jabung on Wednesday to observe the planned location of the industrial estate.

The first stage of the development, which will cost about $1.2 billion, will consist of a steel plant, a power plant, a port and a number of supporting facilities, such as the main office, according to Lizhi. An area as large as 500 hectares will be needed for the first stage.

'€œConstruction will take around one-and-a-half to two years. We expect that we will already be in production by the end of 2016,'€ Lizhi said, adding that the company was still conducting a feasibility study for the later development stages.

For the development project, Fuhai and Ansteel are also cooperating with a company owned by the local administration.

Under the plan, the steel plant will have an output capacity of 1.75 million tons a year. Most of the product will be sold in the domestic market.

'€œAt this moment, the Indonesian market is already able to consume our product. The demand is growing and the country is now importing it,'€ Lizhi said.

Indonesia has seen robust investment in the last few years because of the growing demand. This year, consumption is estimated to stand at 14.7 million tons, an increase of 8 percent from last year, according to the Indonesian Iron and Steel Industry Association (IISIA).

  • The industrial estate will be built in Ujung Jabung, Jambi
  • The estate will be used to develop a steel plant, power plant and other supporting facilities
  • Commercial production is expected to begin in 2016

As much as 65 percent of the demand will be met by a domestic supply, while the remaining 35 percent will be filled by imported product.

Despite the growing demand, Indonesian steel consumption remains low compared to that of its Asian peers, such as Malaysia and Singapore. Consumption of steel per capita in Southeast Asia'€™s largest economy is projected to reach 49.6 kilograms per year by 2015. By 2025, the figure is expected to rise to 100 kilograms when the national steel need is expected to reach 26.2 million tons per year, according to IISIA.

The director general for mineral and coal at the Energy and Mineral Resources Ministry, R. Sukhyar, said Fuhai and Ansteel'€™s development plans would help the country develop a steel industry based on the available raw material.

'€œIf we have iron sands, our steel industry should be based on iron sands and not on iron ore. Krakatau Steel, for example, is based on iron ore and it has to import it from Australia. For me, this doesn'€™t make sense,'€ Sukhyar said.

According to Sukhyar, Fuhai'€™s and Ansteel'€™s steel plant will absorb the iron sands concentrated by their subsidiaries in Cianjur, West Java. Iron sand concentrates from Cianjur will be shipped to be processed in the steel plant in Jambi.

To produce 1.75 million tons of steel, as much as 3.5 million tons of iron sand concentrates will be needed.

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